Higher prices for alcohol are being advocated by the World Health Organization as an effective method of reducing abuse of the substance, in what could be another blow for an industry that has suffered in several countries during the global recession. More price rises could exacerbate the situation for many brewers, which will need to budget carefully if taxes rise again.
The World Health Organization (WHO), an agency of the UN, has said that higher taxes should be implemented on alcohol in order to counter binging and other harmful effects of drinking. However, the body also recommends that the industry be allowed to continue its self-regulation.
In the UK, the British Beer and Pub Association is campaigning for more moderate taxation of alcohol as pub closures reach record levels. The WHO's suggestions, if implemented, would affect both the on-trade and off-trade, but would probably make consumers less inclined to drink in public venues considering the already sizeable price differentials between the two distribution sectors.
The alcoholic beverages industry has previously demonstrated good resistance to recession, but the scale of the current downturn has seen a lot of consumers cut back on their expenditure in this field. Many brewers have already been forced to raise prices due to growing ingredient and production costs, and these companies will be wary of making further increases, as this could have a serious detrimental effect on revenues.
The WHO does, however, contend that the alcohol industry should continue to regulate itself. A number of brewers have shown their support for responsible drinking campaigns and, despite calls that the industry should be under more strict regulation from the government, the WHO warns against tighter controls, claiming that such moves could encourage an illicit market for alcohol.
While there is no indication that the WHO proposals will be adopted, the suggestion that higher prices are needed to counteract alcohol misuse is worrying for the industry. Many consumers around the globe have scaled back their alcohol consumption in the economic downturn, and price rises would make them less likely to reverse this during a recovery period. If these recommendations are implemented, brewers may be forced into some drastic cost-cutting to remain competitive in the marketplace.